A settlement loan isn’t exactly new but it’s only recently that the public has become more aware of it. Plaintiffs who are currently awaiting settlement or fighting their legal battle in court welcome this option which gives them immediate access to funds even as their litigation is still on-going.
Overview
It’s not uncommon for plaintiffs to suffer financial difficulties while their personal injury cases drag on. After all, they still have medical bills to pay, living expenses to take care of, and mortgage and other loans to worry about. Reaching a settlement or winning a case could take years, and this all adds up to the financial burden that plaintiff’s experience.
A settlement loan is a godsend. What it does is put money in your pocket even while your litigation is still on-going. It doesn’t require credit checks, and all that’s needed is for you to have a strong case in your hands.
When you apply for this type of loan, your lender will need to speak with your lawyer, ask for copies of your case-related documents, evaluate your case and once approved, you and your lawyer will sign a lien/agreement prior to disbursing your loan.
Benefits
Aside from the fact that a settlement loan can solve all your financial problems brought about by the personal injury, it will also give you peace of mind knowing that you can go about your day to day activities without having to worry about how you can pay your bills or have money to cover your living expenses.
In addition, you don’t have the obligation to pay back the loan if you don’t receive settlement for your case. If the settlement amount awarded to you is lower than anticipated, there’s also no liability on your part to pay the lender more than the settlement amount.
Drawbacks
Evidently this type of loan is not without drawbacks. Many experts advise against this type of loan unless it is the only viable option you have. That’s because it involves high interest rates which is understandable, considering the nature of the loan. Remember that your lender takes a lot of risks by granting you the loan. If you don’t win your case or if no settlement is given, the lender doesn’t get paid.
In addition, the longer the case drags on, the higher you will be paying. That is because interest charges are compounded every month, at a rate of roughly 2-5% (depending on the lender).
On the face of it, it may seem like the interest rates are too high. But you have to keep in mind that the lender absorbs all the risks. If your case is dismissed, they get paid nothing, not even the principal amount of the loan.
If you require financial assistance, consult your lawyer and discuss the option of a settlement loan. Your lawyer should be able to advise you on the matter so you can make the right decision.
